Fed to start publicly forecasting its rate actions

WASHINGTON - The Federal Reserve will begin later this month to publish a forecast of its own actions, inaugurating a policy that is intended to magnify the power of those actions by shaping the expectations of investors.

The decision to be more open was reached at the most recent meeting of the Fed's policymaking committee, in early December, but was kept secret until Tuesday afternoon, when the Fed published an account of the meeting after a standard delay.

The initial forecast, due in three weeks, is likely to make clear that the Fed intends to keep short-term interest rates near zero beyond the middle of 2013, a course that Fed officials have said could stimulate the economy modestly by further reducing borrowing costs.

The minutes from the last meeting also note that a "number of members" of the 10-person committee favored new steps to boost economic growth but wanted to complete work on the new communications policy before taking additional actions.

Support for additional stimulus was strong despite the collective judgment of the committee that the economy continues to improve. The minutes note that the committee's outlook "had not changed greatly" since the previous meeting.

However, that outlook foresaw only modest growth over the next two years along with persistently high unemployment. Moreover, the Fed's staff - whose economic forecasts historically have been more accurate than the committee's - reduced its medium-term outlook, citing the effect of events in Europe.

New stimulus steps under consideration include a third expansion of the Fed's balance sheet, popularly known as quantitative easing. Some members are particularly interested in buying mortgage-backed securities to boost the housing market.

The change in communications policy is part of a broader effort by the Fed's chairman, Ben Bernanke, to improve public understanding of the central bank's goals and methodology. The Fed has moved gradually toward a regular forecast of its own policies in recent years in a series of one-time predictions, most recently in August, when the committee expressed the intention to keep short-term interest rates near zero through at least the middle of 2013.

The Fed said that it would now publish information about the expectations held by members of that committee for the future path of monetary policy over the current year and the following two years. The first forecast will extend through 2014.

The forecast will be included in an existing set of predictions about future economic conditions that the Fed already publishes four times a year.

The Fed also will publish what it described as "qualitative information" regarding the committee's expectations about the management of the Fed's balance sheet. The Fed's plans for buying or selling assets are, at present, of even greater interest to most investors than the path of short-term interest rates.

Support for the changes was not unanimous, according to the minutes, which said that some members "did not see providing policy projections as a useful step at this time." But the minutes do not record a vote on the subject.

The document simply states that the committee decided to publish the forecast following its next meeting, scheduled to end Jan. 25.